New Zealand PIE Fund U.S. Taxation and Reporting Guide
Contents
New Zealand Trusts & PIE Fund
Tax Treatment of New Zealand Portfolio Investment Entity Fund: With the globalization of the US Economy — along with all the different types of investments foreign countries offer — international tax continues to become more complex and complicated. Even when the United States has a Tax Treaty with a foreign country — it does not mean that that Tax Treaty will account for all the taxation rules of all the different types of investments parties to the agreement offer. When it comes to New Zealand, one of the most common types of investments is a PIE Fund. The acronym PIE refers to Portfolio Investment Entity — and it is similar to a Mutual Fund, ETF or SICAV — but not identical. The question then becomes how is a PIE fund taxed for US Taxation Purposes. Let’s go through the basics of US Tax Treatment of New Zealand PIE Investments:
Portfolio Investment Entity (PIE) Fund Definition
A PIE Fund is a tax preferred type of investment in New Zealand. One of the key attributes of the PIE Fund is that the taxation of the income is not necessarily taxed at the Taxpayers’ progressive personal income tax rate — but rather the PIR (or Prescribe Investor Rate). The PIR Is based on various issues, such as whether the person owns the investment as an individual or entity; whether or not the person is a resident or not of New Zealand; prior year(s) progressive tax rate — and other factors as well.
How is a Portfolio Investment Entity (PIE Fund) Investment Taxed?
The PIE Investment tax calculation in New Zealand is based on the prior to income tax years — then depending on how much income the taxpayer earned in prior years coupled with which tax rate there currently at in New Zealand can result in a significant tax benefit. Typically, the investment institution handles the tax portion of the PIE Income — and therefore unless there is an overestimation or underestimation of the amount due — there is not much for the investor to have to wrangle with a tax time — unless there also a US Person and how to deal with the headache of the IRS.
Not Pension or Retirement Per SE
While the PIE is oftentimes treated as a type of supplemental pension or retirement (similar to an ISA in the UK), it is not pension or retirement per se and therefore there are certain limitations in terms of how a US person with New Zealand PIE investments can seek to avoid tax in the United States.
US Taxation Rules
In general, there is no specific exemption in the United States for PIE investments. Therefore, the investment income generated in New Zealand from PIE Funds, would presumably be taxable in the United States — although the taxpayer would be entitled to a foreign tax credit if taxes were already paid on the taxpayers behalf as an individual.
Reporting the PIE Fund
While the tax implications of having in New Zealand PIE fund are complicated, there is also the international information reporting scenario that has to be handled as well. Depending on the value and investment type of the PIE fund, there are various types of forms that may need to be filed — the main forms include:
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